Azernews.Az

The euro is gradually regaining its position in the foreign exchange market of Azerbaijan which it lost in late April.

Falling to the rate of one manat per euro on May 16 this year, the European currency has traded below this level for almost four months. From September 10, the euro once again crossed the 1 manat mark. According to the Central Bank of Azerbaijan, its official exchange rate is 1.0258 manats now.

Strengthening of the euro in world markets in the backdrop of good news from the Eurozone has boosted the euro in the Azerbaijani foreign exchange market. In particular, these are down to Germany's participation in the European Financial Stability Facility and positive statistics on industrial production in the euro area.

However, the current increase in the euro rate against the manat is not something extraordinary and is unlikely to bring about tangible changes in the domestic currency market. A slight increase in the prices on goods imported from the Eurozone is possible. Their share is 30 per cent of the country's total imports.

It is worthy of note that the goods imported from the Eurozone mainly have an investment purpose. So, the rise in the euro rate will primarily result in higher prices on industrial equipment. Therefore, this trend will not lead to a surge in inflation.

The increase in the dollar rate is more preferable than that of the euro for the value of Azerbaijani foreign currency reserves, as 60 per cent of the central bank's currency reserves are held in dollars and 35 per cent in euros. The currency structure of the investment portfolio of the Azerbaijani State Oil Fund is similar, with 50 per cent of the assets held in U.S. dollars and 40 per cent in euros.

The best option for people's savings is to keep them in different currencies not to lose money. Currently deposits held in manats bring more dividends than those held in dollars and euros. The statistics of the central bank testifies to this. As of August 1, around 56.3 per cent of the population's funds were kept in the national currency, the manat. The people actually have no other choice. The unstable economic situation in the Eurozone does not guarantee stability of the euro exchange rate.

The lack of stability in world financial markets delays the process of issuing Azerbaijani sovereign Eurobonds. In this situation, the increase in the euro rate may affect acceleration of the process. The debut Eurobond issue for the Azerbaijani government is more connected with the growth of the country's image than with the need to borrow funds. This means that the country is seeking to create a benchmark for Azerbaijani securities in world markets. This guideline will work for many years, therefore, the Finance Ministry aims to achieve the maximum profitable spread in the European market.

This year, the Azerbaijani government for the first time included in the concept of social and economic development projections on the average annual exchange rate of the national currency against the euro.

Previously, the budget package usually cited a forecast of the average exchange rate of the manat compared to the U.S. dollar.